DoD Financial Management Regulation Volume 5, Chapter 14 CHAPTER 14 ...

DoD Financial Management Regulation

Volume 5, Chapter 14

CHAPTER 14

LIMITED DEPOSITARY CHECKING ACCOUNTS

1401 INTRODUCTION

140101. Authority. DOs outside the United States are authorized to maintain official limited depositary checking accounts (LDAs) in foreign currency with banks which have been designated by the Treasury as "Depositaries of Public Moneys of the United States." LDAs in U.S. dollars shall not be established unless specific authority is first obtained from the Deputy Director for Finance, DFAS Headquarters, 1931 Jefferson Davis Highway., Arlington, VA 22240-5291, through the servicing DFAS Center.

140102. Opening LDAs. All DOs requiring an LDA shall formally request approval and designation of the financial institution (if other than a contract MBF) as an authorized depositary from Treasury through the servicing DFAS Center. Treasury's policy in selecting the financial institutions that will maintain U.S. Government operating accounts per 31 U.S.C. 3303 (reference (o)) is predicated on the most beneficial banking arrangement available to the U.S. Government to transact essential business. After contract MBFs, preference will be given to American financial institutions unless a local bank's arrangement is more advantageous to the U.S. Government. When anticipating establishment of a new LDA (in other than a contract MBF), the DO shall solicit all American-owned and leading local financial institutions in the area to determine which will offer the most beneficial arrangement. An existing LDA may be solicited by a financial institution at any time and shall be deemed open to all interested financial institutions if it is determined that a soliciting financial institution: (1) offers a more beneficial banking arrangement than currently received; or, (2) reflects a higher level of American ownership than the present limited depositary. For each account, the DO should periodically determine if it may be cost effective to solicit competitive proposals from all American-owned and leading financial institutions in the area to secure the most beneficial banking agreement. The solicitation process of the banks shall be competitive, with all banks submitting written information on identical questionnaires or requests for (banking) propos-

als. In determining the most beneficial banking arrangement, the DO shall consider the following three areas of service in descending order of importance: standard operating services minimally required; customary local banking practices; and, other special services that may be deemed necessary in a particular country or circumstance. At a minimum, the required services shall be:

A. The capability to honor payments to payees in outlying areas.

B. The processing of checks and deposits.

C. The submission of a daily or a monthly bank statement as needed.

D. The acceptance of the DO's funding procedures.

In addition, any customary banking practices (payment of interest on the account, waiver of miscellaneous charges, etc.) peculiar to a particular country shall be considered for purposes of carrying out the provisions of reference (o). Consideration shall also be given to special services a bank would be willing to provide in addition to the minimum required and customary local banking services (e.g., telex cost, armored car service, etc.) if services offered above are equivalent in separate proposals. The checking account balances (or the forfeiture of potential interest earnings on the account) shall not be used to subsidize banking services that would otherwise be funded through the appropriation process. Daily balances in the LDA shall be as near zero as possible. Otherwise, the level of the balance to be maintained in the account shall be determined solely by disbursing requirements. The DO should formally convey the results of the competitive process and its recommendation for selection to Treasury as a part of the request for approval and designation of the depositary. The letter request for approval and designation shall be addressed to the Financial Management Service, Department of the Treasury, Liberty Center, Washington, DC 20227, through the

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servicing DFAS Center and should state the name and location of the financial institution recommended to be designated (regardless of possible previous designations).

140103. Interest on Deposits. In certain cases, Limited Depositaries (LDs) will pay interest on checking accounts. Whenever possible, the DO should obtain interest on the LDA. However, excessive balances shall not be maintained to receive interest. If the collection of foreign currency causes a non-interest bearing LDA to exceed a 30-day supply and all attempts to sell the currencies to other DOs have been exhausted, an interest bearing account shall be established if possible. In such cases, the DO should immediately place all funds in excess of estimated draw-downs against the non-interest bearing account for the ensuing 14-day period in a demand or short-term interest bearing account, if available. The deposit shall be placed with a bank that has been designated as a Depositary of Public Moneys by Treasury. The DO shall place the excess funds in an interest bearing account with the bank that maintains the checking account, unless a more beneficial banking arrangement can be made promptly with another LD. The DO shall canvass the market to obtain the highest interest rates legally available commensurate with disbursing requirements. The DO is responsible for monitoring the interest bearing accounts to ensure that interest is being paid on a timely basis and per agreements reached between the DO and the banks. Upon notification that interest has been credited to the account, the DO shall prepare a DD Form 1131 crediting **1435, General Proprietary Interest, Not Otherwise Classified, for the U.S. dollar equivalent of the interest. The transaction shall be recorded as a collection and an increase of cash on deposit in the LDA.

1402 ESTABLISHMENT OF LIMITED DEPOSITARY CHECKING ACCOUNTS

140201. Establishment Procedure. LDAs shall be established in the name of the activity to which the DO is assigned. Authority to sign checks drawn on the LDA shall be limited to the DO and such other deputies or agents that the DO may appoint. Normally only one LDA is authorized. However, a separate LDA may be established for each type of foreign currency used by the DO in official transactions.

140202. Letter of Authorization. The commander shall certify by letter the name and rank of the DO assigned to the activity and that the DO is authorized to maintain accounts with official funds of the United States in the name of the activity. The letter shall certify that the account is to be subject to checks issued by the DO, his or her successors in office, and such other deputies as he or she may appoint. The letter shall contain a specimen of the DO's official signature and a certification that the signature is that of the DO. The letter shall also request the bank to acknowledge acceptance by endorsement of the letter in triplicate. The bank should retain the original letter and return 2 copies to the activity.

140203. Blank Limited Depositary Checks

A. Procurement. LDA checks are not available through the Treasury check contract. LDA checks should be ordered from the bank where the LDA is maintained.

B. Print Order Requirements. LDA checks should be requested in a continuous-form format for mechanized systems. LDA checks shall be overprinted to provide: the serial number of the check; name of the activity; any limited payability notices as may be applicable in the foreign nation; and, information necessary for security, accounting for check issues, and other requirements as specified by the servicing DFAS Center.

C. Cost. The procurement cost of blank LDA checks shall be charged to the disbursing activity O&M fund.

D. Security. Blank LDA checks shall be controlled and safeguarded under the same guidelines prescribed for Treasury checks in chapter 07 of this Volume. In the event blank LDA checks are lost or stolen, the DO shall immediately notify the LD of the serial numbers of the checks involved. A stoppage of payment shall be placed against the checks and a copy of the stoppage of payment shall be submitted with the next original LDA reports.

E. Relief of DO. Unused LDA checks shall be transferred to and used by the relieving officer with no change in serial numbers.

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F. Limited Depositary Account No Longer Required. When an LDA is no longer required or when a disbursing office is deactivated, all unused blank LDA checks shall be voided and destroyed using the guidelines prescribed in chapter 08 of this Volume for Treasury checks.

1403 MAINTAINING A LIMITED DEPOSITARY CHECKING ACCOUNT

140301. Preparation of Limited Depositary Checks

A. General. LDA checks should be prepared by typewriter or by automated check writing equipment, if available.

B. Record of Check Issues. DOs shall maintain a record of every LDA check issued. The record shall contain at least the payee, the voucher number, the amount (in the currency of the check), the check serial number, the date of the check, and shall identify the activity name under which the account is established. Other information as to the purpose for which the check was issued and local identification codes are optional and subject to the discretion of the issuing DO. The record may be on paper or in a media designed for data processing use (paper tape, diskette, or magnetic tape). A separate record shall be kept for each LDA checking account. Records of check issues shall be included with retained disbursing records.

140302. Disbursement Vouchers. When a

payment is made by check drawn on an LDA,

the notation "LDA Check No.

," shall be

entered on the disbursement voucher. Although

a receipt is not generally required for a payment

made by check, certain LDs outside the United

States are prohibited by local law from returning

paid checks to the drawer. In these cases, the

voucher on which such an LDA check payment

appears shall evidence receipt of payment in one

of the ways described in the following para-

graphs.

paid checks by number and amount, certified by an officer of the bank and by the DO shall be satisfactory evidence of payment. The certificate of the bank should be to the effect: "I certify that the above is a true and correct list of all checks paid by this bank and charged to the account shown in the heading during the period covered by this statement and that the originals of such checks are on file in this bank and are required to be held for years." The certificate of the DO shall be to the effect that the bank statement has been reconciled with the disbursing records and found to be in agreement therewith.

140303. Delivery of Checks. Delivery of LDA checks shall be as prescribed in chapter 08 of this Volume. However, LDA checks shall not be mailed outside the country in which the LDA is located.

140304. Irregularity After Delivery of Checks. When an irregularity is discovered after a check has been delivered and the check is still outstanding, immediate action shall be taken to stop payment of the check. A complete report of the facts shall accompany the request for stoppage. If the irregularity is discovered after the check has been paid, the depositary shall be notified of the irregularity.

140305. Review of Limited Depositary Checking Accounts

A. Commander's Review. Commanders shall require a review of LDAs maintained by DOs to ensure compliance with the requirements set forth in this Volume. This review should be accomplished by the quarterly cash verification team required by chapter 03 of this Volume. Reviews shall be performed quarterly, upon transfer of accountability to a successor DO, upon deactivation of the LDA, or upon a change in the designated settlement office. Quarterly reviews shall be unannounced. Reviews shall also be accomplished prior to the departure of the DO from the command.

A. Signature on Original Voucher. The original voucher shall be submitted as a part of the financial reports for the month of payment.

B. Periodic Statements From Depositary. Periodic statements from the LD listing the

B. DO's Review. DOs shall review the LDA on a continuing basis to ensure that: account balances are maintained at the minimum amount necessary to meet immediate disbursement needs (checks issued and in process) and are commensurate with the activity in the LDA; balances in excess of immediate needs are

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promptly withdrawn and deposited with the Treasury; and, terms negotiated with the depositary are favorable to the Government, including interest on the account at the highest possible rate.

1404 VOIDED AND SPOILED LIMITED DEPOSITARY CHECKS

140401. General. Original LDA checks that are not to be issued shall be treated as voided or spoiled checks. All LDA checks shall be accounted for by the DO who has been authorized to establish the LDA. Checks shall be voided or spoiled because of: errors in the writing of the check (wrong name, amount, etc.); withdrawal of the voucher by the applicable functional area; or, because the check is physically damaged during preparation. These checks shall be conspicuously marked so they may not be cashed, either in error or through fraud. Separate listings of voided and spoiled checks shall be prepared each month and attached to the SF 1149, Statement of Designated Depositary Account.

140402. Voided Checks. The functional area authorizing the payment of a voucher shall determine when a check is to be voided. The determination shall be based on the payee's nonentitlement to the payment, or an error in the way the check is drawn. Voided checks are not reported as checks issued in the check report of the DO. They shall be rendered non-negotiable by stamping, marking or writing the words, "VOID - NOT NEGOTIABLE, NO CHECK ISSUED UNDER THIS NUMBER" on the face of the check in large prominent letters. The marking on the check shall be applied immediately after the determination is made to void the payment. No unmarked voided checks shall be stored in the safe or vault of the DO or any deputies or agents. At the end of each month a listing of voided checks shall be prepared and forwarded with the monthly SF 1149. The listing shall be in check number sequence of the checks, titled "Voided Checks", and show the accounting month; the name of the LD; and, the checking account number. The original of all voided checks shall be submitted with the listing.

140403. Spoiled Checks. The disbursing division issuing the check shall determine when a check is to be reported as spoiled. The determination shall be based on the physical appearance

of the check (mutilated, torn, not whole, smudged, unreadable, etc.) or upon the discovery of an error in the preparation of the check (voucher correct and the check data does not match the voucher). A separate listing (in check number sequence) of spoiled checks shall be prepared at the end of each month. The listing shall be titled "Spoiled Checks" and show the accounting month; the name of the LD; and, the checking account number. The listing and the original spoiled checks shall be attached to, and forwarded with, the monthly SF 1149. Spoiled checks shall be replaced by a control check (if available to the DO from the depositary) or another serially numbered check.

A. Replacement by Control Check.

Disbursing offices using control checks as re-

placements for spoiled checks shall print the

serial numbers of the spoiled checks on the

control checks and verify their accuracy prior to

release. Control checks are not pre-serial num-

bered but they do bear an audit control number

for identifying and tracking their use. The

original serial number of the spoiled check shall

be placed on the control check in the same

relative position where it appeared on the origi-

nal check. The original spoiled check shall be

rendered non-negotiable by writing, marking or

stamping the face of the check "SPOILED - NOT

NEGOTIABLE, REPLACEMENT ISSUED UN-

DER CONTROL NUMBER

". The audit

control number from the control check shall be

inserted in the blank area of this statement on

the original check. Replacement by a control

check causes no change in the depositary check

records or the LDA because the original spoiled

check serial number is carried on the control

check.

B. Replacement by Another Serially

Numbered Check. When it is necessary to issue

another serially numbered check to replace a

spoiled check, the next available numbered check

shall be used. Except for the check serial num-

ber and the check issue date, the information on

the check shall be identical to what appeared on

the original check. The replacement check shall

be dated on the date of issue. The original check

shall be rendered non-negotiable by writing,

marking or stamping the face of the check

"SPOILED - NOT NEGOTIABLE, REPLACE-

MENT ISSUED UNDER CHECK NO.

DATED

". The words "Issued to Replace

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Check No.

" shall be inscribed on every re-

placement check in the lower left-hand corner of

the face of the check. This same information

shall also be shown on the detailed record of

checks issued.

1405 TRANSFERRING THE PROCEEDS OF LIMITED DEPOSITARY CHECKS

140501. General. After an LDA check has been issued events may occur that require transferring the proceeds of the check to the Treasury or to the original appropriation. The most frequent occurrence of transferring the proceeds of LDA checks is when outstanding check amounts are transferred to the Treasury as uncurrent. An uncurrent LDA check is one that has not been negotiated through the LD one full fiscal year after the fiscal year in which it was issued. The transfer of LDA check proceeds may also be caused by undeliverable checks and by checks due deceased or incompetent payees.

140502. Uncurrent Check Transfers. Proceeds of uncurrent checks shall be transferred to Treasury in October of each fiscal year. The DO who issued the original check, the successor to that DO, or a settlement office designated by the servicing DFAS Center shall make the transfer. The procedures for the transfer are explained below. NOTE: If the laws of the nation in which the LDA is located provide that the negotiable period of a check is less than one full fiscal year after the date of issue, the DO shall comply with those laws in carrying out these procedures.

equivalent at the time the checks were issued shall be the amount transferred to the Treasury account, Proceeds and Payment of Certain Unpaid Checks, 20X6045.

2. Stop Payment Notice to LD. The DO shall immediately give a copy of the uncurrent check listing to the LD and request the LD to place stop payments on all the checks on the listing. The LD shall be instructed to advise all payees presenting checks shown on the listing to submit the checks to the disbursing office for transmittal to the General Accounting Office, Transportation and Claims Division, Washington, DC 20548, for settlement.

3. Method of Transfer. The DO shall prepare an OF 1017-G, Journal Voucher which shall serve as the basis to purchase the amount of foreign currency units represented by the outstanding checks. The DO shall then complete the purchase by issuing a Treasury check payable to the U.S. Treasury for the U.S. dollar equivalent as shown on the check listing. A complete explanation of the transaction shall be written on the OF 1017-G giving the date, the check serial number, and the DSSN of the activity issuing the Treasury check. The OF 1017-G shall support the increase in the LDA checkbook balance, and the transaction shall be reported on line 6 of the SF 1149. A copy of the OF 1017-G shall be attached to the uncurrent check listing and forwarded with the Treasury check to Treasury as provided in subparagraph 140502.A.5 below.

A. Open Limited Depositary Accounts

1. Preparation of Check Listing. Prepare a separate check listing in an original and 4 copies for each LDA with a heading showing the name and location of the disbursing office and the name and location of the LD. Each listing shall show the uncurrent LDA checks in ascending numerical order and provide for each check the: issue date; check number; name of the payee; amount of the check in foreign currency; and, U.S. dollar equivalent of the check at the time it was issued (as shown on the payment voucher). The check listing shall also show the total amount of foreign currency units and the total U.S. dollar equivalent of all checks on the listing. The total U.S. dollar

4. Accounting for the Transfer. To maintain the DO's accountability, several actions shall be accomplished in the daily business at the close of the business day on which the transfer occurs. The Treasury check shall be reported in the daily business as "Checks Issued on U.S. Treasury". "Cash on Deposit in Designated Depositary" shall be increased in the same U.S. dollar amount as the Treasury check. The LDA checkbook balance shall be increased by the total amount of foreign currency units as shown on the check listing. The current U.S. dollar equivalent of the LDA checkbook balance (including the foreign currency units added above) shall be computed using the current rate of exchange. The computed total U.S. dollar equivalent of the LDA checkbook balance shall then be compared to the total U.S. dollar equivalent

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